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In a very interesting and off-beat decision, the Third Circuit has thrown out one class of loan officers who alleged misclassification but let stand the lower court’s decision that certified the case as a collective action under the Fair Labor Standards Act.  The case is entitled Reinig et al. v. RBS Citizens NA, and issued from the Third Circuit Court of Appeals.

The panel overruled the decision that had given certification to Loan Officers across ten States who alleged that they were not properly paid for time off the clock.  However, the Court allowed the decision granting collective action certification to stand as it opined that it did not have jurisdiction over that issues as a component of the Employer’s interlocutory appeal.

The Court addressed the issue of “pendent appellate jurisdiction.”  This means that the appellate court is allowed in certain scenarios to assert jurisdiction over issues that are not allowed to be appealed independently but that are “intertwined” with matters over which the Court has jurisdiction.  The Court herein first observed that FLSA collective certification orders are not appealable because they are not final and further concluded that the order in this case was not “inextricably intertwined” with the Rule 23 class certification determination.  Thus, the Court would not exercise pendant jurisdiction over it.

The Court stated that “in so holding, we are persuaded by our prior precedent and the Second Circuit’s well-reasoned decision in [Myers v. Hertz Corp. ] that Rule 23 class certification and FLSA collective action certification are fundamentally different creatures.  Further, judicial efficiency notwithstanding, the myriad problems that could result from exercising jurisdiction in this context counsel against expanding the narrow doctrine of pendent appellate jurisdiction in the way Citizens proposes.”

The legal requirements for conditional certification of FLSA claims is less onerous than securing class certification under Rule 23.  The Court also noted that if it concluded that pendant jurisdiction could be asserted over FLSA certification, then, in the future, a party could “abuse the doctrine” by filing insipid interlocutory appeals so that litigant could get appellate review before a final decision on that issue has been rendered by the district court.

In another (very) interesting twist, the Third Circuit criticized the lower court for not doing its job of specifying the particular classes and claims that were involved.  Indeed, the Court stated that it was compelled to “comb through and cross-reference multiple documents in an attempt to cobble together” the classes and claims that might be amenable to class adjudication.

The Takeaway

Rule 23 claims are harder for a plaintiff to establish as a class.  The danger is that the Rule 23 action is an opt-out, not an opt-in, as a FLSA collective action is; everybody is in except for a handful that might opt out.  It is an interesting twist because I think the Court is right—there would be defendants/employers who would utilize this vehicle as a poor man’s way of getting the collective action certification issue examined sooner rather than later.

Sounds only like good lawyering…

Many employers these days have timekeeping systems that deduct time (e.g. thirty minutes) for lunch on a daily basis.  There is an inherent danger in doing this, as employees may claim that they worked through lunch and therefore should be paid.  This is evidenced in yet another settlement in such an action, a settlement that totals $1.5 million.  The case is entitled Magpayo v. Advocate Health and Hospitals Corp. and was filed in federal court in the Northern District of Illinois.

Lunch BreakThe collective action involved hundreds of emergency room nurses.  This class submitted papers to a federal Judge asking approval of the settlement, which will include 262 ER Nurses.  The motion noted that the employer would have continued to litigate and there were risks, for the plaintiffs, in maintaining the suit.

The motion stated that “the traditional means for handling wage claims like those at issue here — individual litigation — would unduly tax the court system, require a massive expenditure of public and private resources and, given the relatively small value of the claims of the individual class members, would be impracticable.  The proposed settlement, therefore, is the best vehicle for class members to receive the relief to which they are entitled in a prompt and efficient manner.”

As stated above, the theory of the case was worked lunch breaks were going unpaid because of the automatic deductions.  The lead plaintiff also claimed the Hospital did not pay for overtime when more than forty hours were worked and that she had to work after she clocked out.  The class had been certified under Rule 23 of the Federal Rules of Civil Procedure and as a collective action under the Fair Labor Standards Act.

The plaintiffs wanted to settle because there was a risk the class could be decertified and greater expense would be incurred.  The motion noted that by asserting that “additional litigation would only serve to increase the expenses incurred without reducing the risks facing class members.”  The layers will receive $600,000 in fees.

The Takeaway

Automatic lunch deduction systems are legal but there must be a reporting mechanism, a fail-safe mechanism, for when employees do work through lunch (or claim they do).  The employee is trained to fill out a form, submit it to the supervisor for approval, and payment.  Then, the employer is protected and the employee properly paid for a true missed lunch break.

Sounds simple, yet these suits keep happening?

This is an interesting case because it combines the elements of necessary, but not proven, commonality of situation for class certification and a quirky element of overtime calculation based on a unique FLSA provision.  The bottom line is that the two workers who sought a class action on both the federal and state levels lost both because of the need for too much individual scrutiny of worker claims.  The case is entitled Sinclair et al. v. PGA Inc., and was filed in federal court in the Western District of Wisconsin.

The Judge rejected the claim, for a class, that the Company should have paid the higher wage rates for skilled labor (e.g. trade work, such as carpentry) as opposed to generic wage rates.  The Judge also agreed to decertify a FLSA collective whose overtime rates were allegedly miscalculated or underestimated.  The Judge opined that the state-law part of the suit did not possess several elements of a viable class action under Rule 23, citing to the need for too much individual attention needed for each worker’s situation.  The Judge also observed that no other worker had opted into the suit, and this fact “undermines the entire purpose of a collective action.”

The theory was that the employer violated the Wisconsin prevailing wage law by paying workers at a lower, general for work done to support more skilled work.  The plaintiffs alleged that this practice violated the FLSA because the rate should have been that which they earned before overtime kicked in as opposed to the lower-rated work they were actually performing in the overtime hours.

Importantly, the Judge denied the request for class certification on the prevailing wage claims.  The Court held that the workers failed to meet the numerosity requirement, as they could not make a showing as to the actual number of workers who worked the lower-rated support work.  They also could not meet the “predominance” requirement, meaning that the underpayment theory applied to most members of the class.

The Judge stated that the claim of the employees is based “not just on the amount, but also on the type of work” each class member did, and would force the court to make “an individual determination of whether an employee’s work on a specific week, day and even hour made possible, supported or cleaned up after a skilled trade worker.”  The Court added that a trial would focus on individual workers’ “unique work on an hourly, daily or weekly basis” and whether it should have been paid at higher wages, the workers did not meet the “superiority” requirement that they show a single class case would be better than a series of individual cases.

The Takeaway

Here, the workers lost the federal and state class actions.  The state case is quite interesting because it shows a path for employers sued in class actions in prevailing wage cases how they can defeat the motion for class certification.  I have preached this dogma for years and repeat it proudly now, again.

Individual scrutiny destroys a class!